Dunedin high on unaffordable list

By Simon Hartley

Created 24/01/13

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Dunedin is among the top five least affordable places to
buy a house in the country, with its December median price
at $255,500. Photo by Craig Baxter.

Dunedin's house prices may place it among the country's
top five cities in terms of lack of affordability, but the
majority of city sales remain in the under-$399,000 bracket,
albeit with high demand in a sector where listings have
declined.

Despite 40-year record low mortgage rates, new entrants to
Auckland and Queenstown were last December bracketed into
respective median prices of $535,000 and $568,000.

The Annual Demographia International Housing Affordability
Survey found New Zealand had no affordable housing markets
with an affordability multiple of 3.0 or less, nor moderately
unaffordable markets at 3.1-4.0 - as is the case in Australia
and the United Kingdom.

The survey found housing around New Zealand was severely
unaffordable, with the median multiple of 5.3, slightly
higher than last year's 5.2.

''Houses in New Zealand are now nearly 80% more expensive
than the historic affordability housing norm of 3.0, last
experienced in the 1990s,'' the survey said.

ASB chief economist Nick Tuffley said the fact New Zealand
had neither affordable or moderately affordable markets, and
signs of recent price buoyancy, did not equate to a new
property bubble forming.

''There is not as much high risk as in the last boom,'' Mr
Tuffley said when contacted.

''There's no surprise that a large chunk of the price
pressure is coming from Auckland and Christchurch''.

Real Estate Institute of New Zealand director for the lower
South Island Liz Nidd, of Dunedin, said while Dunedin
featured on the unaffordable list, it was still possible to
buy a ''tidy bungalow'' for around $250,000 in the city, but
with ''some compromise'' required on choice of suburb.

''Our market is still accessible. Demand is bigger than
supply in the $200,000-$300,000 [range],'' she said.

Mr Tuffley highlighted that national listings were lower than
the mid-2000s boom and outside of Auckland and Christchurch
the housing price increases were ''modest''.

The ''broader risk'' lay in mortgage rates being at 40-year
lows.

''People have more confidence and courage to enter the
market, which is where the risk is,'' Mr Tuffley said.

With the Government wanting people's earnings put into more
productive parts of the economy, Mr Tuffley believed it, and
the Reserve bank, would ''act far more swiftly'' to raise
interest rates at signs of a another housing bubble
developing.

Queenstown does not feature in the survey, but with a median
December price of $568,000 it far overshadows Auckland and
New Zealand's median price, equating to requiring a median
household annual income of almost $190,000 to be considered
affordable.

For December, of 170 houses sold in Dunedin, 85% of those
sales were below $399,000, Ms Nidd said. At the time, the
national median hit a record $389,000 for December''You can
see that this is where the Dunedin market [majority] is
sitting,'' she said.

A decline of median Dunedin prices from $275,000 for November
to $255,500 for December was ''closer to reality'' for the
day to day market, she said.

She said ''top end'' sales appeared to take an ''early
Christmas break'', with just seven for December in the
$500,000-$600,000 range, three in the $600,000-$700,000 range
and only one at more than $700,000.

Listing numbers for Dunedin had fallen from 1001 in November
to 903, ''somewhat depleting'' the inventory, but Ms Nidd
expected a post-holiday ''influx'' in coming weeks.

While Dunedin features as being unaffordable, Ms Nidd
believed it was less the actual house prices responsible,
than lower household incomes, which propelled the city into
unaffordable.

While 60% of the New Zealand markets rate as severely
unaffordable, more than 75% of the Australian markets are
also severely unaffordable.

Queenstown has often topped previous New Zealand-based
affordability surveys, and Ms Nidd said its desirability,
popularity and prices meant it ''blurred'' Otago's
statistics, which is why the REINZ reported it as a separate
entity.

Housing affordability
The affordability multiple is ideally three times a
household's gross annual income being the area's median house
price, or less. Dunedin households, faced with a median
December price of $255,500, would require a gross annual
income $85,166 for the city to be affordable, at a multiple
of 3.0.